Alterations in the basement membrane receptor dystroglycan (DG) are evident in muscular dystrophies and carcinoma cells and characterized by a selective loss or modification of the extracellular alpha-DG subunit. Defects in posttranslational modifications of DG have been identified in some muscular dystrophies, but the underlying modifications in carcinoma cells have not yet been defined. We reveal here multiple posttranslational modifications that modulate the composition and function of DG in normal epithelial cells and carcinoma cells. We show that alpha-DG is shed from the cell surface of normal and tumorigenic epithelial cells through a proteolytic mechanism that does not require direct cleavage of either alpha- or beta-DG. Shedding is dependent on metalloprotease activity and the proprotein convertase furin. Surprisingly, furin is also found to directly process alpha-DG as a proprotein substrate, changing the existing model of DG composition. We also show that the glycosylation of alpha-DG is altered in invasive carcinoma cells, and this modification causes complete loss of laminin binding properties. Together, these data elucidate several novel events regulating the functional composition of DG and reveal defects that arise during cancer progression, providing direction for efforts to restore this link with the basement membrane in carcinoma cells.